Home Prices Are Down Nearly $80,000 in Some 905 Markets Compared to April
There was a steep decline in home sales in the 905 last month, according to the latest statistics form the Toronto Regional Real Estate Board (TRREB). And, although that did not prevent prices from increasing on an annual basis, values are steadily dropping in the region’s suburban markets, by almost $80,000 in some cases month over month.
Sales activity during the month of May in the 905 was not as frenetic as last year, but still strong; looking at the aggregate figures from the 905, sales decreased to 4,604 in May 2022 from 7,802 a year earlier, however, new listings climbed to 11,802 from 11,541, and the average sale price rose to $1,200,621 from $1,103,219.
Durham, Halton Regions See the Steepest Price Declines
A highly-sought buying destination during the pandemic, Durham Region home prices have dipped back below the $1M mark, dropping 7.4% from April to $995,668 — a difference of $79,664.
Durham Region only had 679 transactions in May of this year – that’s down from 1,574 transactions 12 months earlier. The total volume of sales and the average price last year were $1,419,960,738 and $902,135, respectively. There were 1,546 new listings last month and 960 active listings, down from 2,048 and 889, respectively, in May 2021.
Again, compared to April 2022, there was a steep reduction in sales activity. Two months ago, there were 1,089 transactions worth $1,171,036,798, which averaged $1,075,332, while there were 2,338 new listings and 1,278 active listings.
Halton Region also saw home prices slip by a considerable amount on a monthly basis; the average home price came in at $1,313,651, a 5% decline, representing a $70,297 drop.
There were a total of 439 sales, 912 active listings and 1,061 new listings – a considerable year-over-year drop from the 1,197 transactions in 2021.
Declines Less Sustained in Peel and York Regions
There were only 632 sales in Peel Region last month, declining precipitously from 2,379 in May 2021, and while the sales volume for the month this year was $963,526,671, it was a whopping $2,512,003,459 just 12 months earlier. That contributed to a monthly decline in price of $61,460 to an average of $1,180,883 — a 4.9% decrease.
Active listings this year fell to 1,400 from 2,179 last year, while new listings dropped to 1,732 from 3,728.
Peel Region also saw a dramatic decline in activity from April of this year, when there were 1,535 sales worth $1,906,995,823 that averaged $1,242,343. There were also remarkably more new and active listings, respectively totalling 3,893 and 2,564 two months ago. Like Halton Region, though, long-term demand remains historically high and it’s putting upward pressure on the price of homes.
Meanwhile, prices dipped -3.9% in York Region — down $56,993 — to an average of $1,677,250. There were 591 sales in May 2022, however during the same month last year there were nearly four times more transactions at 2,192, which totalled $2,837,717,505 and averaged $1,294,579. There were 1,778 new listings this year and 1,761 active listings, but there were 3,464 and 2,668, respectively, in May 2021.
High Gas Prices and Buyer Fatigue Converge
Several factors, namely Canada’s inflation rate reaching a 31-year high of 6.8%, have conspired to make quotidian expenses pricier, and it’s all adding up. Davelle Morrison, a broker with Bosley Real Estate in Toronto, says gasoline prices are making buyers think twice about buying homes in the 905, where public transit leaves much to be desired.
“Maybe in the 905 the gasoline prices are having a huge effect because if you now need to be back to work downtown and you’ll be idling on the DVP, and with gas prices what they are, you will rethink that ‘drive till you buy’ mentality we had before,” she said, “because if you’re living in those areas and not working from home, instead having to drive to downtown Toronto, that really won’t work.
“The 905 is expensive to drive around now, so more people are pulling back from the 905 than in the 416.”
The Bank of Canada hiked its Overnight Lending Rate on June 1, marking a consecutive 50 basis point increase. Although the overnight rate is 1.5%, which is still below the 1.75% rate before the pandemic began, there’s every reason to expect a final benchmark rate well north of where it was to start 2020. That, too, is affecting homebuyers’ purchasing decisions to such an extent that Morrison believes it explains the sharp decline in transactions throughout the 905 in May from just one month earlier.
“Interest rate hikes have something to do with it. I have clients who were qualified at $2M, and after rate increases they only qualified for $1.8M,” Morrison said. “As rates continue going higher, everyone has to get qualified at the stress test amount. It’s okay to do variable but if you do fixed you’ll qualify for less money.”
Then there’s buyer fatigue, she added.
“Buyers get fatigued by the prices. We all know prices have been going up for a while and they’re tired of losing. I’ve been telling my clients who want to list to list now because buyers are getting tired. We see it in the numbers — fewer showings and fewer offers. People are re-listing their houses after offer day because they’re not getting the prices they want.”
There is Evidence of a 905 Bubble
There’s strong evidence of bubble conditions in the 905. The sole fundamental that drove home sales outside of Toronto through the pandemic was demand, driving up prices rapidly and completely untethering home prices from local fundamentals like income and economy.
Real estate broker Tom Storey of Royal LePage Signature Realty told STOREYS earlier this week that virtually every municipality within 90 minutes of the City of Toronto is reckoning with rapid valuation increases over the last couple of years.
“The markets beyond the 905, like Simcoe County, Guelph, Kitchener, I really do think if we talk about price drops from February, those markets will see them more dramatically than Toronto and most of the 905,” he said. “They increased at such a [rapid] rate, with some of them doubling from $500,000 to $1M in two years, and that was based on extremely cheap money and buyers leaving Toronto for those markets, which pushed the prices up.”